ISOQUANTSEqual Quantity of Production
MEANING OF ISOQUANTS• Isoquants are the curves, which represent the
different combinations of inputs producing a particular quantity of output
• Any combination on the isoquant represents the some level of output
• Isoquant is a production function with two variables inputs, which are substitutable for one another within limits
• Thus an isoquant shows all possible combinations of two inputs, which are capable of producing equal or a given level of output
Equation : Q = f (L,K) 2
ASSUMPTIONS OF ISOQUANTS
• There are only two factors of production.
• The two factors can substitute each other up
to certain limit.
• The shape of the isoquants depends upon the
extent of substitutability of the two inputs.
• The technology is given over a period
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AN ISOQUANT MAY BE EXPLAINED WITH THE HELP OF AN ARITHMETICAL EXAMPLES
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Combinations
Labour (units)
Capital (units)
Output (quantity)
A 1 10 50
B 2 7 50
C 3 4 50
D 4 3 50
E 5 1 50
ISOQUANT CURVE :
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1, 10
2, 7
3, 44, 3
5, 10
2
4
6
8
10
12
0 1 2 3 4 5 6
Capi
tal (
K)
Labour (L)
ISOQUANTS
FEATURES OF ISOQUANTS
It is a downward sloping curveIt is convex to originIt does not intersectIt does not touch axis 6
MARGINAL RATE OF TECHNICAL SUBSTITUTION MARGINAL RATE OF TECHNICAL SUBSTITUTION (MRTS)(MRTS)• MRTS refers to the rate at which one input factor
is substituted with the other to attain a given level of output
• It is measured as
MRTS = changes in one input/changes in another input
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Combinations
Labour (units)
Capital (units)
Output (quantity
)
MRTS
A 1 10 50 ----
B 2 7 50 1:3
C 3 4 50 1:3
D 4 3 50 1:1
E 5 1 50 1:1
ISOCOSTSEqual Cost of Production
DEFINITION OF ISOCOSTS
Isocosts refers to that cost curve that represents the combination of inputs that will cost the producer the same amount of money.
In other words, each isocost denotes a particular level of total cost for a given level of production. If the given level of production changes, the total cost changes and thus the isocost curve moves upwards. And vice versa.
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ISOCOST CURVE
In the following figure three downwards sloping straight line cost curves each costing Rs.1.0 lakh, Rs. 1.5 lakh and Rs. 2.0lakh for the output levels of 20,000, 30,000 and 40,000 units. Isocosts farther from the origin, for given input costs, are associated with higher costs. Any change in input prices changes the slope of isocost lines 10
ISOCOSTS VS. ISOQUANTS
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